Answer to Question #88989 in Microeconomics for ricard

Question

Tom is a full-time lecturer at a private higher education institution and is considering a career in
carpentry. He wishes to pursue a career in carpentry (a childhood dream) which he has studied part-time
and is now equipped to take on clients. In his current position he earns a rate of R1000 per day and if he
were to pursue a career in carpentry he would earn R800 per day. Due to the flexibility of the
employment conditions at the higher education institution he works for, Tom can negotiate the number of
days he works at and will receive a rate of remuneration based on the number of days worked.

Discuss the underlying assumption of the shape of the above drawn diagram and comment on how
likely this could be true with respect the above scenario.

Answer 1

PPF shows possible combinations of earnings potential between the two careers, and is depicted as a line. That is likely to be true as a result of the flexible employment conditions which give the possibility to combine the two careers without any additional costs or changes in productivity.